Lords tighten auto-enrolment requirements

The Pensions Bill has moved to the House of Commons with one additional amendment: to strengthen the regulatory framework of the alternative certification model.

The government amendment, put forward by Lord Freud during the bill's third reading in the Lords yesterday, will affect employers seeking alternative certification that an existing occupational scheme meets auto-enrolment requirements.

It requires them to show at least 90% of jobholders would receive the same level of contributions under the certification test as they would have received if their scheme had satisfied the relevant quality requirement.

This is in contrast to the initial requirement which referred to "a majority of the individual relevant jobholders".

The amendment also requires the secretary of state to review the evidence base of the test every three years.

Lord Freud said this was expected to involve analysing the dataset from the Annual Survey of Hours and Earnings, known as ASHE.

He added the amendment was intended to address concerns raised at the report stage by Labour peers Lord McKenzie and Lady Drake that the initial wording could leave a significant minority of employees with insufficient provisions.

While supporting the government's progress towards auto-enrolment, Lord McKenzie expressed several reservations about the bill.

"Some employees might miss out because of the certification process," he said.

"The three-month waiting period in Clause 6 could reduce an individual's accumulated years of savings by nearly three years; the introduction of the earnings trigger would exclude some 600,000 individuals; and the broad uprating powers in Clause 8 would allow the government to achieve their aspiration of a trigger of £10,190.

"This would exclude a further 800,000 workers each year, three-quarters of whom would be women."

An amendment tabled by Baroness Hollis to require a report on the single state pension, proposed in a green paper this month before the increase to the women's state pension age is scheduled by the bill to begin, was withdrawn.

Revisiting the accelerated timetable for this increase, Baroness Hollis said the decision, which broke a post-election coalition pledge, was "pretty disreputable".

Lord Freud said the options explored in the green paper and the increase to the state pension age were not interdependent but reassured the House that such an assessment would be carried out.

The bill moved to the House of Commons, where its second reading is yet to be scheduled.